This matter is before the Court on writ of certiorari for the Fifth Circuit which overturned the Federal Trade Commission decision that respondent Sperry and Hutchinson, frequently referred to as S&H, has engaged in certain unfair activities in its Green Stamp business in violation of Section 5 of the Federal Trade Commission Act.

The complaint in this case was in three counts.

Count one was in the nature of a resale price maintenance charge that S&H issued stamps to retailers and required the retailers to dispense them to consumers in ratio of one stamp to each 10 cents worth of purchase.

Second count charged conspiracy to carry out this program, the 1:10 ratio and count three was in the nature of an unreasonable restraint on the alienation charge that is that S&H carried out a policy of suppressing trading stamp exchanges and preventing anyone other than S&H from redeeming S&H stamps.

And this count also contained a charge of conspiracy by S&H with other stamp firms to carry out this program.

In all three counts, the complaint alleged that the practices were anti-competitive and to the detriment of the consuming public.

Commission found violation under all three counts but S&H appealed only on count three and the Fifth Circuit vacated the Commission's order in a 2:1 decision.

Judge Wisdom dissenting that majority decision is now here for review.

There are two questions presented.

The first principle question is whether the Fifth Circuit was in error in holding the FTC’s power under section five to declare particular methods of competition and particular acts and practices unfair is limited to conduct which violates the letter or the spirit of the antitrust laws.

A subordinate question is whether the Commission erred as the Circuit Court seems to indicate in failing to give sufficient weight to decisions under State Law that operations of stamp exchanges and the retailers who redeemed S&H stamps were unlawful.

The government’s position on these two questions since the first one is that FTC’s power is not limited to declaring practices unfair simply when they are antitrust type of conduct.

Rather, we think the Commission has a broad mandate to consider the circumstances of particular cases to determine what is unfair in the light of the public interest and without trying to define the outer limits of this power.

We think it is clear first that a practice maybe held unfair by FTC where it has analyzed all the facts and circumstances of particular case considered reasons for the practice, the need forth by the practitioner.

Its impact on the various factors in Commerce and if FTC determines on this basis, that the practice may have or has had a significant adverse effect on competition.

Secondly, we think that the practice maybe held unfair where it is detrimental to the interest of the consuming public entirely without regard to the question of effect on competition.

On the second question, the State Law question, our position is that State Courts decisions on matters as between private parties are to be given little rate in a Government case where the issue involves the public interest and particularly where broad public policy considerations such as those found in Section 5 case are present.

I have no doubt that the arrangements for example in the Brown Shoe case and the Gasoline Company TBA cases were entirely legal under State Law but as the Court will recall, those arrangements had to give way to the overriding policy of the Federal Trade Commission Act and its intent to protect a competition.

Turning to the facts of the particular case, they are relatively simple and I think substantially undisputed.

S&H is trading operation as the promotional service for retailers.

Under the system S&H licenses, limited number of retailers to handle its stamps in each area.

The retailers receives the stamps from S&H on consignment and the retailers pay a service charge in proportion to the number of stamps they received.

This runs an average of $2.68 a book of 12 hundred stamps.

The retailers in turn dispense the stamps to consumers in proportion to their purchases and this has been as I indicate earlier on a one for ten basis, one stamps to instant purchase and this book says, the S&H book says is compensation for cash payment.

In other words, nature of the cash discount.

Consumers however are only authorized to paste the stamps in books and to redeem the books with S&H for merchandise, nothing else.

The books worth about three dollars on redemption and merchandise and the record indicates that somewhere between 5% and 14% of stamps go unredeemed as the records shows also that as of 1964 there were several hundred million worth of unredeemed stamps outstanding.

Chief Justice Warren E. Burger: For what period?

Mr. Mclaren: That went back to the beginning of S&H.

Chief Justice Warren E. Burger: I assume rather long, a long period of time?

Mr. Mclaren: A long period of time, yes.

However, S&H's purchases runs some 320 million a year and it growth recedes.

So this is more than a good bit more than one year.

Turning to the trading stamps industry, we find that is a rather concentrated one with six companies having some 85% of the business.

Although, there are some total of 400 companies.

S&H is a good bit bank, the number one in the industry.

About 40% of total industry receipts and some three times the size of its nearest competitor.

Some 77 thousand retail outlets handle S&H stamps and nearly 60% of all American households according to record sale S&H stamps, that is around 35 million families.

To give an idea of the overall economic importance of stamps in 1964, the stamps of all kind were issued on 40 billion dollars worth purchases and on some 43% to 46% of all food store purchase.

In some areas, it went as high as 95% and the record shows that RX 24 that where stamps are prevalent.

They tend to increase the level of retail prices and making the calculation of one stamp for a 10 cent purchase, this would come to about 2% on sales.

Coming to the main issue of trading stamps exchanges and the redeeming retailers, the record indicates that exchange is developed to meet the desire of consumers to get more out of the various stamps that they were receiving as a shop.

A good many housewives testified and I think it is fair to say from their testimony that they principally wanted to consolidate different stamps into one kind of a stamp.

This permitted them to go out and redeem.

They would not have to wait so long to fill up a single kind of stamp book.

They could get their Christmas presents or whatever it might be to fill an immediate need or in some cases they wanted to cash them in.

Perhaps they are leaving the part of the country where the stamps reused or they came to a part of the company where they were not in circulation, perhaps their military personnel going abroad, sometimes they wanted to get a better buy as they could get a better selection from one company stamp catalogs and from another or maybe the redemption center was more convenient. Within 25 miles you cannot mail in, you must come-in in person.

If you do not have a card perhaps there is another company with a more center.

In any event the exchanges grew up, the cumulative stocks of the different kinds of stamps as many as 50.

Different kinds would be stocked.

They would principally exchange and I think that was some 60% of their business.

They would also sell stamps to help somebody get the 7th book, if we had six together, we would get a particular item something in that order and they would buy stamps from people who wanted to sell as I indicated.

They charged a fee of around 30 to 50 cents per book for exchanging and they also had varying prices perhaps they buy for a dollar-and-a-half a book and sell for two quarter at 275 per book.

The record also shows that small retailers got into the redemption business as a way of competing for business.

They would give credit for stamps on purchases, perhaps small items would not be carried in the catalogues, work clothing, baby clothing, shoes, the hose, and things like that or in another cases retailers would accept the stamps as down payments on bigger items comparable to those in the catalogues and this was the way that some of the appliance stores and small department stores had competing in effect with the redemption centers of S&H.

They take the stamps as down payment.

Now, the pleadings and the evidence show that S&H had a very strong program with regard to these exchangers and retailers handling the stamps.

They tried in every way, I think one of the executives testified to prevent that.

They wrote hundreds of letters, they took court action to close down this kind of an operations and the record shows that they were quite successful in doing so.

The businesses of some of the exchange or exchanges enjoined from handling as to make stamps dropped of 40% to 60%.

Some closed down completely and many redeeming retailers stopped handling stamps.

Some consumers testified that they would give or throw stamps away in the absence of exchanges because if you had to take through the whole length of time on a single brand, it just took too long to work that.

Now S&H is just occasion for its program was given through the testimony of a Doctor.

One Director that the free exchange and redemption by others would break the relationship between S&H and retailers and the consumer, would reduce the incentive of shoppers to patronize the S&H retailers to fill their books and it would reduce or eliminate this to redemption centers and over all would reduce the tie of the consumer to S&H.

This would in turn cause the retailer to lose interest in S&H and they anticipated that they would lose their licensees.

S&H did not offer any evidence that this in fact happened in any of these areas where the exchanges or the redeeming retailers operated in a number of them who testified were still on operation.

They had not been enjoined.

S&H showed no loss of licensees nor even complaints by licensees.

No retailer took the stand to indicate that he had any loss of consumer business in the areas where the exchanges or other retailers were redeeming.

Many housewives testified although they used the exchanges.

This did not lessen their buying at S&H stores to change their shopping habits in any way and other evidence shows also that stamps are insignificant factor with housewives in deciding where to shop.

In other words they decided where to shop based on price and specials on convenient and quality of the need or produced from this for particular basic goods.

Many things other than stamps although a survey did show that some 16% of people will go out of the way to get particular stamps but only 16%.

Now FTC’s decision on these facts is based on what I think it is fair to say as the rule of reason approach.

They considered this, it is a very lengthy record.

Many thousand of pages, they considered the justification of his claims.

They considered the need for this restrictions.

Mandate considered particularly the impact of the restriction.

They found no good business reason for it.

They found no necessity for the restriction and they held that the fears of S&H as officers, that they would lose licensees and so on were entitled the very little weight because they are in general terms.

They weren't backed up by hard tracks and because they were contrary to the other evidence that S&H in fact had not been heard and they saw no signs.

It would be heard by the extremes and to out or by retailers, the redemptions in the future.

I think there is good precedent for rejecting that kind of testimony in here.

I would to the Court's holding sold off a bank’s, where the opinions of Bank officers as to adverse effect on competition from the merger so that competition would be entered and so on, was not given very weight.

FTC’s ultimate finding here was that the effect of S&H practices in quoting was to fair, unfairly suppress such exchanges and the business of such retailers to the detriment of the persons engaged therein and the consuming public and be to substantially impair and restraining competition.

The commission concluded that the act in practices were ”to the prejudice and injury of the public that they unreasonably restrained, injured and impaired competition and thereby were unfair under Section 5.”

I think it is important to note that both the complaint and complaint counsel's theory of the case throughout emphasize this restrictive policy on exchange and redemption had an unreasonable impact on the consuming public as well as an adverse effect on competition.

Justice Potter Stewart: Mr. Mclaren?

May I interrupt you with a question.

The Federal Trade Commissions opinion, both the opinion of commission by Commissioner Mcintyre is concurrent with Commissioner Elman of the defense seem primarily concerned with this one for ten policy.

One per ten ratio of policy, has that dropped out of this case entirely.

I gather from the brief here is not an issue before us at all.

Mr. Mclaren: I am sorry; I did not make that clear Mr. Justice Stewart.

The commission found against S&H on that proposition.

Both as a unilateral enforcement and as the conspiracy and there was no appeal on that.

Justice Potter Stewart: I see, that was the only count.

Mr. Mclaren: It was only count three that came to the Court of Appeals and it is only count three that is here.

Justice Potter Stewart: I think the concurring opinion of Commissioner Elman and the dissenting opinion do not really direct themselves to Count Three in any explicit kind of way at all?

Mr. Mclaren: Mr. Elman’s opinion as I recall.

He concurred in the result here but he had dissented from the issuance of the complaint originally on the theory that there are to be incomplete in --.

Justice Potter Stewart: Industry wide study.

Mr. Mclaren: Industry wide study, yes.

Justice Potter Stewart: Right.

Mr. Mclaren: And I think he simply concurred and reiterated that then Commissioner Jones I believe dissented only on the theory that the remedy did not go far enough with respect to the one for ten holdings.

In other words there was a limit on maximum designation of the trading ratio but not on the minimum.

She thought there ought to be both and I think she went by all the old record.

Justice Potter Stewart: So there was no appeal by S&H on finding suggested on counts one and two?

Mr. Mclaren: That is correct.

Justice Potter Stewart: Thank you.

Mr. Mclaren: Well, as the matter of law.

We think that the Commission in this case could have based its decision on either of these two grounds.

The adverse effect on competition or the detrimental effect upon the consuming public.

As to the first ground, I think at least since Brown Shoe where the Gratz rule was official entered, this Court has recognized that although ultimate responsibility risks with the Courts, Congress has reposed on FTC very broad powers to give content to the term 'unfair' and to determine at exactly what point when a practice is otherwise lawful.

At what point in its effect upon competition, the practice becomes unfair.

As the Court said on the text called TBA case, “it is enough that the practice in question unfairly burden competition were not insignificant volume of commerce”.

And here I think that standard was not only met but substantially exceeded since the commission found that with respect to exchanges, S&H had an exercise.

Monopoly power over the trading stamps exchanges and they intended to eliminate a whole class of small businessman.

As far as the retailers are concerned, they found that there is a restorative trade on these retailers and found stamps and other way of competing and serving their customers and those two points.

I think fully support the commission on the anti competitive ground.

As far as the unfairness for being detrimental to the interest of the public, I think that is fully supported as Judge Wisdom pointed out in its dissent, it was a very purpose of the Wheeler-Lea Amendment in 1938 to establish this proposition.

The legislative history which Judge Wisdom outlined, various lower Federal Court decisions which we have listed in our briefs and the commission itself and of course under the rules of this Court and the commissions interpretation of its own statute is entitled to a great deal of way.

The commission has interpreted a statute in that way.

All in support of this particular proposition that whether it is adverse affect on the consuming public, there needn't be in effect, adverse effect on competition.

In fact, FTC in a very analytical opinion going into the matter very carefully based its holding on both of these propositions and under the test applicable on these appeals, we think it is warranted in the record and there is reason in the law to support it and we would urge for these reasons that the Court reverse the decisions of Fifth Circuit and remand for a judgment.

Justice William J. Brennan: Mr. Mclaren would you mind telling me precisely what are your (Inaudible).

Mr. Mclaren: It is at paragraph 5, Mr. Justice Brennan and in paragraph 6 and paragraph 7.

Justice William J. Brennan: Those were the only first.

Mr. Mclaren: Yes,

Justice William J. Brennan: I gather S&H has five and the rest is the others, is that it?

Mr. Mclaren: I assume that they are in process.

Justice William J. Brennan: At least it is not on appeal.

Mr. Mclaren: Not on appeal.

Justice Byron R. White: Could you tell me where is the Federal Trade Commission finding conclusions or opinion it relies on the entree to consumers?

Mr. Mclaren: Mr. Justice White, the opinion itself speaks very little in the section under count three of the impact on consumers.

I think that it is in the ultimate findings which I read, which were I think on page 125 there, and there are one or two other references in the Commissions opinion.

Mostly, the Commission addressed itself to the question of the --

Justice Byron R. White: Anticompetitive

Mr. Mclaren: Anticompetitive effect and-

Justice Byron R. White: Do you think, do you think really that a Court could affirm the Commission by putting aside the question of the anticompetitive effect in just resting it solely on the injuries of consumers even if there was no injury to competition?

Mr. Mclaren: As the matter of law, I think in your question of course Mr. Justice White in this particular case.

Justice Byron R. White: Would not be resting an affirmance on the ground that the Commission really reached?

Mr. Mclaren: No, I think that in this particular case, the Commission saw this as a matter of impact upon the consumer from the elimination of these outlets and this runs throughout the opinion and the both Commission.

Justice Byron R. White: I hope that the Commission and- do you think a fair reading of the Commission's opinion is that even if there is no injury to competition, we nevertheless find this as an unfair practice because consumers are injured?

Mr. Mclaren: Yes.

I think so and I would point the report --

Justice Byron R. White: I certainly read your brief that way but I did wonder where you can find the appropriate commission.

Mr. Mclaren: I look at order.

At the order they say that S&H can no longer purport to reserve title and to restrain alienation of it.

Justice Byron R. White: I know but the Commission expressly said in its opinion, they did not want to rest its opinion on any such narrow technical ground.

Did it not?

Mr. Mclaren: And it is not the opinion but the order goes to that and that have (Inaudible) to me.

Justice Byron R. White: I know but the opinion said that it did not want to rest it on that technical ground.

It would prefer to rest it on broader considerations of effect upon competitionm that's almost what --

Mr. Mclaren: I think that it is true that the impact on competition caused the injuries to the consumer and --

Justice Byron R. White: Well, so again I say, if the impact on competition then was essential to the FTC’s conclusion.

Mr. Mclaren: That undoubtedly is true.

Justice Byron R. White: Well then.

But do you take the approach that regardless of its effect on competition.

The judgment could be the Commission should be upheld because of the impact on the consumer?

Mr. Mclaren: No.

I do not think we quite say that Mr. Justice White.

We say that the Fifth Circuit is wrong in saying that you must have a violation of sphere or the letter of antitrust law and we say they are wrong in two ways.

You can have anticompetitive impact that is not a violation of the antitrust law as it violates section 5.

You can also have an impact by consumers without regard to competition and you can hold the section 5 violation on that ground.

That is a far reaching opinion, Mr. Justice White, in the Fifth Circuit and we feel badly needs rejection in order for the FTC to continue by its business.

Justice Byron R. White: Well, maybe that is true but what I am truly getting at is whether or not an appellate Court would be free to affirm the Commission or Uphold the Commission on the so ground that injury to consumers rather than to competition.

In light of the facts that the business is clear to me anyway that the Commission rest it on in such independent ground.

Mr. Mclaren: As a matter of law, yes they could.

On this record I think the Commission rested on both.

I would like to call your attention to the phrase in the middle of page 177 where the Commission said that the trading exchanges had provided a useful and valuable function, but I agree with you.

We do have two propositions here.

One, the question of law where we are speaking to what the Fifth Circuit said, the other a question of this record and here I think the Commission rested on both, both the impact on the consumer and on the competition.

I would like to reserve rest of time I have.

Chief Justice Warren E. Burger: Thank you, Mr. Mclaren.

Mr. Russell?

Argument of Harold L. Russell

Mr. Harold L. Russell: Mr. Chief Justice, may it please the Court.

At the outset, I would like to note that actually the only paragraph of the order with which we are concerned is paragraph 5 which appears at pages 127, 128 of joint appendix.

All we want to do is to be able as I have said unilaterally and all by our selves to go to Court as we have done for 75 years to protect the quality and integrity of our stamp business by stopping unauthorized trafficking in stamps.

S&H is in the business of licensing retail merchants to use its sales promotion system which is based upon the use of S&H trading stamps.

Retail merchants subscribe to that service to increase trade and to maintain and enhance customer loyalty.

They use stamps to get their customers to return to their stores again and again until they have collected enough stamps to secure redemption merchandise of their choice.

Throughout the history of this company, non licensed retailers, stamps exchangers have attempted to cash in on the S&H system without paying for the S&H service.

By purchasing, exchanging and making other Commercial use of S&H stamps without S&H authorization.

Now the reason we have consistently sought judicial relief and the reason why the Courts have enjoined it.

Is that if competing merchants were free to redeem S&H stamps issued by S&H licensees for their own merchandise or they could exchange S&H stamps for their own stamps or the consumers could get stamps of trading stamps exchanges rather than as a licensee.

The S&H system had lost its attraction for the licensees to after all of the people who pay S&H for the use of its service.

In fact, in the case of unauthorized redeeming retailer, the S&H system could be turned into an instrument to introduce the S&H licensee’s customers to the store of a non licensed competitor.

This is a basic reason why the Court of equity has consistently granted judicial relief to S&H against unauthorized traffickers.

Holding at these traffickers have been engaged in unfair competition and tortuous interference with S&H contractual and business relations.

The central question presented in this case is whether S&H actions in preventing the unauthorized commercial use of its trading stamps by obtaining judicial relief against the abuse constitutes an unfair practice violating Section 5.

The petitioner’s main argument is that S&H actions violate section 5 and that because of the Court restraints.

S&H stamps savers do not have complete freedom of choice in the transfer of their stamps.

This is alleged to be unfair to consumers who are said thereby to be deprived of the full value of the stamps.

S&H contends on other hand that the challenged actions are essential to this successful conduct of its business for the reasons previously stated and the worst that could be said with regard to consumers that appealed them.

The record does not show how many appealed them.

Maybe inconvenience by S&H actions and preventing of stamp traffickers from offering to purchase or redeem stamps.

I might say the reason show or the reason why the record shows, no experience in the matter of injury to S&H by the activity of these traffickers is that the Courts over a period of 67 years have restrained the activity of the exchanges on an unauthorized redeeming retailers.

Although there are other defects in the Commissions decision which would preclude the affirmance as requested by petitioner.

There are really two fundamental effects in petitioner’s position.

First is that the Commission did not make findings of unfairness or inconvenience to consumers which the petitioner alleges would support its request.

Secondly, if the Commission had made findings on accordance with petitioner’s contentions even if they had gone that far, they did not.

The findings were not support of conclusion that S&H is conduct violated Section 5.

In short, the requested order, petitioners requested order would be beyond the scope of Section 5 and upside the jurisdiction of the Commission.

It has never before been suggested that inconvenience could be a basis for determination that Section 5 has been violated.

The Commission, in fact purported to decide only an unfair competition case and entire competition case.

Not an unfair to consumer’s case.

It found that the action of S&H in stopping unauthorized trafficking in its stamps was an unfair method of competition.

We appeal an argument really made the Fifth Circuit foreign to any arguments which you heard today but they are to remain to the basic issue before you which was the decision of the Commission tracked, it should be confirmed, affirmed.

Now, the errors which we urged upon the Fifth Circuit in which are reasons why this Commission decision should not be affirmed or one, that a most flagrant error of the Commission was that it pointedly ignored the 43 decisions of the Courts and 8 Federal Districts and 19 States upholding unanimously our practice of proceeding against commercial practices and it likewise ignored the statutes of four States which make trafficking a crime.

Now, we say that the Commission should have considered those decisions and found them controlling.

The petitioner’s come a little bit to our view this morning and it said that they should be given some weight.

But on either standards, the Commissions decision is wrong because it did not consider those decisions at all and it pointedly ignored them.

Secondly, the Commission decision is an error because it says that the simple matter of writing letters in good faith, followed up with necessary by Court action based upon unfair competition that is a simple matter of going to Court constituted conduct, contravening section 5.

The third thing that is wrong of this Commission decision is that the Commission erroneously fail to consider that the traffickers themselves as determined by the 43 Court decisions in the State statutes are engaged in unlawful activity and therefore they are not entitled to the protection of Section 5.

And finally and this was an egregious error in the Commission decision.

That Commission erroneously ignored the effect of its action on competition among and between Trading Stamp Companies.

We said that the Commissions decision would make all brands of stamps interchangeable and would destroy trading stamp competition.

The Court of Appeal agreed with this and it as did the Commission considered the case as one involving anticompetitive practices.

It pointed out that all are fairly challenged to do so.

The Commission had been unable to point that any antitrust law which S&H has violated even in letter and spirit and that the efforts of S&H to prevent that which time and time had been declared unlawful, did not constitute practices of the type which transgresses the spirit of antitrust laws.

Fifth Circuit said that mere injury to traffickers was not enough to establish violation of Section 5, that the Commission itself had pointed out that trading stamps are involved on means of competitions at the retail level to come on integral and important part of retailing in America and they went on to agree with us that the order of the Commission would make all stamps interchangeable and would reduce as against other trading stamp companies the effectiveness of S&H as competitive too.

Now, in seeking certiorari, the petitioner presented two questions.

One as to whether the Court of Appeals restricted erroneously Section 5 conduct which violates the letters, sphere of the antitrust laws.

And secondly, which the petitioner restated this morning which was did the Commission err in failing to give sufficient weight to decisions under State law.

That was as it was presented this morning and indicated whether under petitioner’s view of that or our view, the Commission was wrong or it did not consider at all 43 decisions.

Now, in some the petitioners urging you to affirm the decision of the Commission upon the basis of evidence which is not in the record before the Commission.

Upon the basis of evidence not considered by the Commission, upon the basis of findings not made by the Commission and upon the basis of legal theories without support in the legislative history of Section 5 are in the decisions with the Court or in the decisions of the Commission.

Some of the things that I think that are important, in this context is petitioners claim that the Commission found that S&H's activity in stopping traffickers was to the detriment of the traffickers and also to the consuming public.

Now, therefore that the prejudice and injury of the consuming public.

Now, those so called findings are not findings in any sense but are wholly naked, ultimate conclusions and are in fact there is simply mechanical repetitions of the conclusions contained in the original complaint.

They are found on the 89 or 90 so called findings and then the second of a three conclusions and they are preceded by no discussion of any evidence of consumer injury by no mention of consumer injury, by no basic or underlying findings and more importantly they found, they form no basis for the action of the Commission.

Justice Potter Stewart: Where are these findings in the appendix, what page?

Mr. Harold L. Russell: Yes sir, page 126 and that those are the ones that I have just mentioned and actually petitioner has two fragile straws upon which it relies 126 and 176.

Justice Potter Stewart: Now that page 126 --

Mr. Harold L. Russell: Of the joint appendix one yes.

Justice Potter Stewart: Page 126 finding 89?

Mr. Harold L. Russell: 89 and then the second of the three conclusions immediately below that.

Justice Potter Stewart: All right, thank you.

Mr. Harold L. Russell: And then 176, you find the second straw where it is alleged and petitioner alleges that the Commission adopted the examiner's finding on injury to consumers.

Now the Commission did not know such things and first full paragraph.

Unknown Speaker: 176.

Mr. Harold L. Russell: Yes.

Excuse me Sir.

176 first full paragraphs the last five lines.

Justice Potter Stewart: The effects found by the examiner?

Mr. Harold L. Russell: Right

Justice Potter Stewart: Alright

Mr. Harold L. Russell: That is only referenced to consumers and it merely mentioned in passing and it did not adopt.

As a matter of fact it pointedly I think refrained from adopting because the complaint counsel had asked for finding on this subject that the Commission made non and if you refer back Your Honor to the statement of the examiner and that to which the Commission referred and it appears at joint appendix 73.

What the examiner said was that the stamp collector had less of a choice than she would have had if she could have used the stamps as currency anywhere she chose.

Now, he went ahead to point out to make the stamps equivalent of currency would be for the Commission to exercise its power solely for the convenience consumers and he noted that Section 5 does not give the Commission such power or at the power only to prevent unfair action practices.

Chief Justice Warren E. Burger: You lost me there and Mr. Russell, what were your reading?

Mr. Harold L. Russell: I was reading at first your Honor.

Mr. Chief Justice excuse me.

Chief Justice Warren E. Burger: Still at 176.

Mr. Harold L. Russell: At 176, the Commission referred and did not adopt the finding of the examiner.

Chief Justice Warren E. Burger: I am just trying to relate what were the several facts.

Mr. Harold L. Russell: The examiner's finding to which it referred appears at 73 and the examiners said that the stamp saver did not have, did not issue our currency which of course we could not do because we cannot get it whole sale, we cannot stand businesses.

We cannot buy materials whole sale that our costumer redeem in that retail prices and furthermore 78 of the examiners decision.

70 records he pointed out that this is matter of mere convenience to the consumer.

And at Section 5 does not give Commission the power over mere convenience.

Now Commissions certain did not adopt the findings of the examiner on injury to consumer.

The examiner did not find the injury to the consumer and the examiner found simply a matter of possible convenience to the consumer which did not want to exercise the Commission's power.

Now, the big point is that the commission itself did not consider any way to evidence as to the fact of S&H actions upon consumers and since the Commission did not make a determination of facts.

A large part of the petitioner’s argument has been taken up with the request that Supreme Court consider evidence not considered by the Commission that you make findings not made by the Commission.

For example, the petitioner urges you to find that the cost of groceries is ordinarily higher but recalls stamps are issued by retailers, when stamps are issued by retailer.

Now the Commission made no such finding.

There was not more quest to do so by complaint counsel.

As a matter of fact, complaint counsel asked the Commission to find that stamps reduced prices.

I think it is just absolutely wrong for the petitioner to be coming here and saying, find the stamps raised prices when a contrary finding was asked to the Commission, and a matter of fact that 158 your Honors, the Commission found that stamps reflect a price reduction.

Now, petitioner also asked you to make a finding not made by the Commission that under the order a higher percentage of stamps would be redeemed and that consumers as a whole would thereby get greater benefits from the stamps.

Now the fact is that such a finding was requested by complaint counsel before the Commission refused to make such a finding.

And the fact is that the Commission conceded that is much as 95% of S&H stamps are redeemed or maybe redeemed and there is no support in the record, petitioners cites the assumption that a higher percentage would be redeemed.

Over an unchallenged finding, the examiner stated that competition forces S&H to invest the value of unredeemed stamps and greater values for savers and licensees.

And Your Honor, the unredeemed stamps of which petitioner spoke amounted to 14% of those outstanding which were almost precisely the same in number as those issued in the preceding year and the record shows that there is a year lag between the issuance and redemption.

As a matter of fact 13% were issued in the year 1964.

The last year involved in this Compilation and here we have a situation where 95% of the people are getting a $3 redemption value for $2.68 cents cost to the retailer.

We have a situation where we had seven consumer witnesses out of 35 million households who save S&H stamps, we have a situation where even those seven consumer witnesses did not complain about S&H practices, where a situation which they say that the most is more convenient sometimes for them to use the trading stamp exchange than it is to redeem their stamps.

Now, the petitioner asked you to make other findings not made by the Commission.

Such as this business about the man who owns no cart and not get to the redemption center but the examiner found and it would not dispute it that even if a man as within the 25 mile range of a redemption center which is inconvenient for them to get to the center.

He can and does redeem by mail.

That appears at pages 39 and 46 at the record before you, I could go on on others things.

As a matter of fact the last night, I did a compilation from the respondent’s briefs and I found that they have asked you at least 50 times to consider smatterings of evidence not considered by the Commission and they have asked you at least six or eight times such as in this matter of effect on price.

This matter of greater number redemptions to make findings which they recognize are essential to their position and which the Commission itself did not make.

Justice Potter Stewart: Did the commission's order have anything to do with redemption for cash which I understand as required in two States Wisconsin and Wyoming and 16 other States require that the purchaser have an option of doing so, is that right?

Mr. Harold L. Russell: That is correct Your Honor, I think it is fair to say that no part of this treatment of count three was involved with that aspect of the trading stamp.

Justice Potter Stewart: Trading stamp.

No part of that question is before us?

Mr. Harold L. Russell: And I believe it is right.

As a matter of fact I am sure it is right.

Now, I would like to go on to the legal question which is before you and that is that petitioner says he has asked this Court to answer the question whether section 5 is limited to conduct which violates the letter's sphere of antitrust law.

Now, on this question is has no difference between the parties.

Obviously Section 5 is not so limited since its enactment Section 5 has been held a black not only to antitrust like conduct but also the deceptive practices and other forms of unfair conduct.

The real question before the Court is how far can the Commission go in holding a practice which is not deceptive or in the nature of an unfair, of antitrust violation to be unfair.

Are there any limits at all that the Commission have unrestricted of authority to condemned practices simply because it is of the opinion that they are not beneficial to add beneficial consumers as some modification might be.

Now, when Section 5 was originally enacted, many were afraid that the language of a statute was too broad and in congressional debates, the daughters were reassured that unfairness of the competition actually had some limitations.

And it was even said that the practice is covered or to be limit of those which shock the universal conscience of mankind.

Now it is more than interesting to note.

Your Honor that one of the unfair practices referred to in the debates.

As being an unfair practices was that of inducing savers of S&H stamps to fill an trade their unfilled books of S&H stamps for the stamps of another company.

That was a reference for the case of S&H versus Louie Weber and under the Commission's order in this case we could not bring that case which we brought in 1908 and which Congress said represented the type of unfair competition, unfair practice case with Section 5 was suppose to cover.

Justice Potter Stewart: I did not quite understand.

What was the supposed unfair practice that appears on the legislative history?

Mr. Harold L. Russell: That is a case of S&H versus Louis Weber, a Federal District Court case in 1908 and which it was held that S&H, I mean S&H got in injunction against this rascal who was swapping his stamps for S&H stamps and that were to some and substance of it although petitioner attempts a wholly and adequate distinction of the matter in which he says that first that this rascal was selling these stamps back to our licensees.

The Court said, it does not appear that happened very much but the point is that under this Commission order, this rascal could sell these stamps back to our licensees.

Is that the order runs on against re-issuance but non licensees, it is not our licensee.

So it would be completely powerless to prevent what the Congress thought was an unfair method of the competition.

Justice Potter Stewart: Who in the view of the Congressman who refer to this which who is being unfair; S&H or Mr. Weber?

Mr. Harold L. Russell: Louis Weber

Justice Potter Stewart: Mr. Weber

Mr. Harold L. Russell: Exactly, exactly Your Honor.

He referred to that as an unfair competitive practice and unfair trade practice.

Unknown Speaker: Mr. Weber operating in exchange or was he just (Voice Overlap).

Mr. Harold L. Russell: He was the competing stamps company.

Now the broadest interpretation of the Commission's power as I believe could be found in its report on cigarette advertising and labeling in which to come right to the point insofar as we are concerned.

The Commission said that something would be unfair and unfair or deceptive act or practices if in addition to be morally objectionable.

It is seriously detrimental to consumers or others.

Now, under no stretch, the imagination could have be said that our challenged actions violate that kind of standard.

The principal argument of the petitioner is that we have been unfair to consumers and petitioner argues about raising the cost of goods, or the prices of the groceries and that the matters of greater redemption which as we pointed out for findings of Commission did not make at all in which the petitioner would have view like -- now, the basic question is, is it unfair for S&H not to offer the conveniences if there are any such of the Trading Stamp Exchange, unauthorized redeeming retailers which have some cost.

You heard this morning about paying a dollar-and-a-half for a book of stamps which is worth $3.00.

One of these Trading Stamps Exchange operators testified his principal part of his business came from door to door salesman who went around selling bibles and photos and they took S&H trading stamp books from the unsuspecting housewife and then took on the Rosenwasser and whose give him a dollar-and-a-half book form and then Rosenwasser went to S&H and got TV sets which Rosenwasser was able to sell to the TV store down the street for stock and trade.

Now this is a principal part of this rascal’s business but this is a kind of thing which petitioner would have you protect.

If it has been on a overreaching of the consumer at the consumer level, it is done by trading stamp exchanges and not by S&H.

Now, is it unfair for S&H to prevent that kind of practice?

Certainly, it does not seem so to me and the restrictions which do not, the restrictions on transfer ability which do not put a substantial burden upon the consumer are justified in this particular case without question.

Now--

Justice William O. Douglas: Did you say that the only provision or the order was paragraph 5 on page 127?

Mr. Harold L. Russell: Yes Mr. Justice Douglas.

Justice William O. Douglas: That is the only one in this.

Mr. Harold L. Russell: All we want to do is to be able unilaterally and all by ourselves to go to Court, to stamp out unfair competition as we have done for the 75 years of our company’s existence.

Now, in conclusion, I come back to the request of the Petitioner.

This Court affirmed the Commission's decision and gave you the reasons why it would be grossly inappropriate for the Court to take that action.

Not to be repetitive but the Commission pointedly ignored the 43 decisions.

The Commission erred in saying when we wrote letters in a good faith and brought litigation in good faith we were transgressing Section 5.

The Commission erred in failing to consider that the traffickers themselves are engaged in unlawful activity and therefore entitled to no protection under Section 5.

The Commission erred in over ruling its hearing examiner and holding that S&H is not harmed by unauthorized trafficking in their stamps.

It erred in ignoring the fact that its action would destroy competition among and between the trading stamp companies.

As petitioner appears to concede by its argument here, the decision can not be affirmed unless the Supreme Court of United States made factual findings on injury to consumers not made by the Commission and more importantly as petitioner appears to concede that an order can not be affirmed unless you conclude contrary to all authority and contrary to the Commission's broadest interpretation of its jurisdiction under Section 5 that inconvenience to consumers constitutes the violation of that section.

Now, finally and I believe, also importantly, the Commission's action could not be affirmed upon the basis not relied upon by the Commission, namely alleged harm to consumers.

A factor which has been stated by you in Burlington,Chenery lately an investment company, that the order may not be affirmed upon the basis of appellate counsel's post rationalizations.

Now, the Commission is here your Honors is in my view, only because it is seeking a sweeping exposition of its powers in the consumers field and must be obvious to you I hope, that these case which was instituted at 1965, six years ago today, and tried in 1966 before this Commission became so acutely consumer conscience that this case is only in actuality (Inaudible) of a case out of which the Commissions desire that first decision can not be made.

The Commission had never found that this matter of injury to consumers even initially justified that institution of the proceeding.

As you heard this morning, there were three counts.

This count although of great importance to us, was a small tail on a large dog.

The Commission was primarily concerned with 1:10 was a conspiracy with respect to 1:10 and it would be to me shocking that this act or thought, bowl or plate pranked in mechanical reproduction of the complaint as to consumer injury.

Without discussion of the facts of consumer injury could be found to support this decision of the Commission and even if we took the case to the point where petitioner, I think ended when he was questioned this morning that the Commission's decision should be affirmed because anti-competitive problems as well as consumers problems.

You recall that when the Commission relies upon several factors and put some into conjunctive and one falls they all falls.

On the matter of injury to competition, the Fifth Circuit was entirely right and the petitioners pointed out no reasons why in this anticompetitive aspect of the case, the Fifth Circuit should be reversed.

Chief Justice Warren E. Burger: Thank you Mr. Russel.

Mr. Mclaren, you have four minutes left.

Rebuttal of Mclaren

Mr. Mclaren: Thank you Mr. Chief Justice.

With regard to the question of the prices, RX 24, an exhibit of the respondent states “stamp cost clearly range margins when all or most retailers in an area employ them”.

RX 24K that is.

We think may it please the Court that this is a good debt more in a question of convenience of consumers as I indicated earlier, some 43% to 46% of all food purchases carry with them food stamps and there is testimony in the record and I think it is well justified.

Housewives feel that they pay for these stamps and the witnesses who testified felt that they should have a right to deal with them substantially as they wished and not to be restricted in something that they had paid for.

Chief Justice Warren E. Burger: Where do we find the specific finding on that by the Commission?

Mr. Mclaren: No specific Mr. Chief Justice I was quoting from the testimony of one of the witnesses.

Chief Justice Warren E. Burger: It was not, certainly, would the defender I hope that the commission made a finding on that force?

Mr. Mclaren: I think it would.

Chief Justice, on the other hand, I think where we follow the standard on judicial review, if we look for warrant in the record and reason in law and I think there is warrant in the record.

This count three came at the end of the very long opinion that dealt in many respects with this whole stamp business and restrictive practices that S&H used and the fact I think that count three does not fully contain every little finding should not be read in isolation but rather the opinion should be looked at as a whole and as well as the fact that there is record support for these propositions that I think are inherent in the lengthy findings and the opinion of the prosecution.

Chief Justice Warren E. Burger: That is the case now, is it not?

Mr. Mclaren: I beg your pardon?

Unknown Speaker: This is the heart of the case that is before us now, is it not?

Mr. Mclaren: Well, the heart of the case is double findings that there is an adverse effect on competition, that there is an adverse effect on the consuming public.

I think that that if the Commission had taken the approach solely of going by the proposition of the legal consequence of S&H having eliminated these outlets and focussed entirely on the fact that now all these outlets are out of the way, they have this restriction in the book that says you do not own the stamp and so on and so on.

We find that just an ultimate finding, this has prevented consumers from dealing freely with stamps. This is an unfair method of competition or an unfair trade practice.

I think that would have been enough but they did both.

On the way to that finding, on the way to the consumer finding they said this has an adverse effect on competition that in effect will support an unfair holding.

They are supported both ways and I do not think that say should be folded simply because they did not spell out the fact that here and they are along the way.

This effect and not effect on the consumer, the effect on the consumer was tied in with the effect on the competition.

The two things, the restrictive provision in the stamp and the elimination of the places where you could trade the stamps.

Justice Potter Stewart: And you think Mr. Mclaren that in reading Commissioner Mcintyre’s opinion for the Commission reading that part of it which refers to issues rise under count three which is the only part.

The only issue directly before us now but nonetheless we should sort of assume that there is an implicit incorporation by reference of the discussion in the earlier part of its opinion which is the lion share of the opinion, is that your point now?

Mr. Mclaren: I think it need not be ignored Mr. Justice Stewart and I think that there is a solid finding and it is a finding at page 126 that way.

It is not a conclusion.

It is a finding and then they went on and they concluded that the effect of all of this was anti-competitive in contrary to this.